Assessment reopening upheld for bogus donations under section 35(1)(ii) after investigation revealed fraudulent accommodation entries

ITAT Kolkata upheld the AO's decision to reopen assessment and disallow deduction under section 35(1)(ii) for bogus donations. The tribunal rejected the assessee's cross-objection challenging reopening, finding that specific information from DDIT investigation regarding fraudulent accommodation entries by over 1500 donors provided valid grounds for reopening within four years. The AO's opinion was not considered "borrowed" as it was based on transmitted investigation material. Regarding the donation deduction, ITAT found the assessee failed to prove genuineness after Revenue dispelled initial onus with credible evidence of organized fraud involving 720 entities. The tribunal emphasized this was criminal conspiracy to defraud the nation, not genuine charitable giving, and restored the AO's order denying the deduction.

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Issues Involved:
1. Jurisdictional aspect of reopening the assessment under section 147 of the Income Tax Act.
2. Entitlement of the assessee for deduction under section 35(1)(ii) of the Income Tax Act, 1961.

Summary:

Jurisdictional Aspect of Reopening the Assessment:
The assessee challenged the reopening of the assessment under section 147 of the Income Tax Act, arguing that the objections against reopening were not decided by the Assessing Officer (AO) before proceeding with the assessment. The Tribunal noted that the AO had issued notices under sections 143(2) and 142(1) and commenced reassessment proceedings. The Tribunal examined various judicial decisions, including those from the Madras High Court and Delhi High Court, which held that non-disposal of objections is a procedural irregularity that does not invalidate the reassessment proceedings. The Tribunal concluded that the procedural error of not disposing of objections does not render the reassessment order invalid and can be cured.

Entitlement for Deduction under Section 35(1)(ii):
The core issue was whether the assessee was entitled to a deduction of Rs. 1,75,00,000/- under section 35(1)(ii) for donations made to M/s. School of Human Genetic and Population Health, Kolkata. The Tribunal referred to the ITAT Kolkata's decision in the case of Tarasafe International Pvt. Limited, which disallowed such deductions based on findings that the donee institution was involved in providing accommodation entries rather than genuine research activities. The Tribunal considered the material evidence from the survey and statements of brokers, which indicated that the donations were part of a fraudulent scheme to claim tax deductions. The Tribunal concluded that the assessee's belief in the legitimacy of the donation was not bonafide, given the organized fraud involving brokers and the donee institution, and thus upheld the disallowance of the deduction.

Conclusion:
The Tribunal dismissed the Cross Objection filed by the assessee, upheld the reopening of the assessment under section 147, and disallowed the deduction under section 35(1)(ii), aligning with the findings of the earlier ITAT decisions and the material evidence presented. The appeal of the Revenue was allowed, and the Cross Objection of the assessee was dismissed.

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